TaxTMI 
TaxTMI 
2005 (3) TMI 68
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....x Officer amounting to Rs. 16,121 on account of presentation articles as also an amount of Rs. 35,226 as sales expenses which according to the Income-tax Officer were hit by the provisions of section 37(2A)?" The assessment year is 1984-85 and the relevant accounting period is the previous year ended on June 30, 1983. The assessee, a public limited company filed return on July 31, 1984 disclosing a total income of Rs. 20,55,630. The assessment was framed on February 27, 1987 on a total income of Rs. 41,16,769. During the course of assessment the Assessing Officer disallowed the sums of Rs. 16,121 on account of presentation articles and Rs. 35,226 shown as sales expenses. It appears that the latter sum of Rs. 35,226 included expenses incu....
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....een incurred for employees of the assessee-company and in these circumstances in the light of Explanation 2 to section 37(2A) of the Act the amounts had rightly been disallowed by the Assessing Officer; that the Tribunal was in error in allowing the same. As against that Mr. Manish J. Shah, the learned advocate appearing on behalf of the respondent-assessee submitted that in so far as the item of expenditure of Rs. 16,121 was concerned, the same had been incurred on account of presentation articles and in no view of the matter could the same be considered as entertainment expenditure. That such expenditure was incurred for the purpose of developing and maintaining the goodwill of the assessee-company and was not incurred for providing an....
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....enditure on provision of hospitality of every kind by the assessee to any person, whether by way of provision of food or beverages or in any other manner whatsoever. The rest of the portion of the Explanation is not relevant for the present. In these circumstances, the question which falls for consideration is whether expenditure incurred on presentation articles can be termed to be either entertainment or providing of hospitality, whether by way of food or beverages or in any other manner whatsoever. In the case of CIT v. Patel Brothers and Co. Ltd. [1995] 215 ITR 165 the apex court was called upon to decide this very controversy. The Supreme Court after taking into consideration: (i) the provision as it stood before the insertion of Ex....
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....ospitality" normally cannot be included in the ordinary meaning of the term "entertainment", but falls within the enlarged meaning given to the words by Explanation 2 to section 37(2A) of the Act. It is apparent that the expenditure in question cannot be termed to be entertainment ordinarily, because it connotes something which is beneficial for mental or physical well being but is not essential or indispensable for human existence. Hence, normal meaning of the term "hospitality" is required to be taken into consideration in the absence of an)- definition under the Act. The said term as defined in the dictionary "Oxford Advanced Learner's Dictionary (2000 Edition)" reads as under: "hospitality 1. friendly and generous behaviour towards g....